Pepco WattPlan: Powerful Tool, Flawed Calculations
If you have gone solar, or are thinking about going solar, you are familiar with the many variables involved. These include energy costs, financial incentives, roof design, shading, electricity usage, panel efficiency, and renewable energy credits. To address these complexities, Pepco has developed a “solar calculator” tool, WattPlan, designed to help potential solar customers understand the interplay between these variables. The calculator allows you to input your home’s specific information and receive a projection of solar costs and savings. Unfortunately, WattPlan grossly underestimates the savings going solar offers and provides misleading and inaccurate information.
DC SUN conducted detailed research into the information provided by the calculator. We found its cost estimates and projected savings do not reflect current solar reality in Pepco’s D.C. service territory. WattPlan fails because it provides unrealistic dollar-per-watt cost estimates and does not factor SREC values into its savings calculations.
Dollar-per-Watt cost estimates
When calculating a user’s cost of going solar, Pepco’s configuration of the WattPlan software uses a default of $4.00/watt installation cost. This assumes that the average solar installer in Pepco’s D.C. service area will charge customers $4.00 for every watt of solar they install. Unfortunately for WattPlan users, this assumption is too high. The average dollar-per-watt installation costs in the mid-Atlantic region is $3.50/watt. This fifty cents makes a big difference. Residential solar installations can run from 3 kW (3000 watts) to 10 kW (7000 watts) in size. So a $0.50 cost discrepancy means Pepco’s calculator is off by thousands of dollars.
DC SUN ran the WattPlan calculator for a typical four-bedroom D.C. row-house. Right off the bat, WattPlan over-estimated the size of the typical system that would be placed on the roof. The calculator yields a system size of 6.5 kW, which, although possible, is larger than most system sizes in the District. On average, the typical residential D.C. system is 5.5 kW. This over-estimation of size skews WattPlan’s cost calculations, as does its baseline dollar-per-watt cost. While these flawed default settings are bad for calculator users, there is some good news: users can manually change certain settings within WattPlan. Accordingly, we ran the WattPlan calculator again, this time manually decreasing the system size to 5.5 kW and the dollar-per-watt installation cost to $3.50/watt. Whereas WattPlan’s first default calculation yielded a total cost estimate of $26,000, this second (more accurate) calculation returned an estimate of $19,250. The result of WattPlan’s flawed default assumptions is significant: a cost differential of $6,750.
Pepco’s configuration of the WattPlan calculator with an exaggerated dollar-per-watt default affects more than just its estimate of installation cost. It also alters calculations of estimated lifetime cost savings. WattPlan defines these as “what you can expect to save with solar compared to what you would spend over the next 20 years if you did nothing”. For the same four-bedroom row-house, DC SUN found that WattPlan’s default calculations offered some dismal estimates: negative savings. WattPlan estimated a 2% loss in savings for a solar PV system paid upfront. When DC SUN manually reduced the dollar-per-watt cost to $3.50/watt and decreased the system size to 5.5 kW, lifetime cost savings improved marginally. This time, WattPlan estimated 4% lifetime savings. Meager, but better than the default savings calculation.
Similarly, when DC SUN used WattPlan to calculate the lifetime cost savings for a leased solar PV system, the default settings ($4.00/watt installation cost, 6.5 kW size) yielded an estimate of 7% loss in savings. When DC SUN manually reduced dollar-per-watt cost to $3.50/watt and decreased size to 5.5 kW, the estimated lifetime savings increased slightly to 1%. For both solar ownership scenarios (upfront payment and lease), the flawed default cost setting of $4.00/watt (and over-estimated system size) significantly reduced the quantity of lifetime savings predicted by WattPlan.
Finally, the default cost setting of $4.00/watt yields a payback period calculation that is much longer than what it would be in the real world. WattPlan estimates that payback is impossible within the lifetime of the system. However, this is not the case. When DC SUN decreased the default dollar-per-watt cost to $3.50/watt, WattPlan’s estimated payback period was reduced. For both the original 6.5 kW and 5.5 kW system sizes, our manual dollar-per-watt cost reduction saw WattPlan’s estimated payback period improve from “no payback ever” – an abysmal estimate- to 19 years. (This is without the inclusion of other incentives, which we will discuss below.) In real life, most D.C. residents see their systems pay back themselves between years 3 and 10, factoring in incentives and renewable energy credits (which WattPlan omits).
For many homeowners, payback period is a principal concern when considering solar. For Pepco’s calculator to overestimate payback periods because of an inaccurate cost assumption is particularly worrisome.
So, for Pepco’s WattPlan calculator to be fully accurate, the default regional price should be set at $3.50/watt. It should be noted that even lower installation costs are possible through installer promotions and solar bulk purchase programs.
Solar Renewable Energy Credit (SREC) values
WattPlan also misleads customers by not including the value of Solar Renewable Energy Credits (SRECs). These credits represent the “green value” of energy produced by a solar PV system. They carry a monetary value and can be traded on an open market, generating a potential revenue stream for the SREC owner. This revenue is an important tool for financing solar systems. Yet, WattPlan displays no information about SREC values on its website, and appears to exclude these values from its calculations.
The District’s SREC market is strong, trading at more than $400 a piece. While the SREC market is dynamic and prices are subject to change, the financial value of these credits is undeniable. In many cases, factoring in SREC value into total cost estimates significantly reduces a system’s payback period.
Solar PV system owners have multiple options for monetizing their credits. They can sell their SRECs on the spot market, sell them annually, or sell their system’s lifetime production of SRECs for an upfront payment. DC SUN estimates that this last option can reduce upfront system cost by 9%. In the example D.C. row-house from above, WattPlan estimated a default system size of 6.5 kW. If that homeowner were to sell 15 years’ worth of SREC production for an upfront payment today, they would receive $8,450. This amount of money was not factored into WattPlan’s calculation.
SREC’s absence from the calculator is a serious flaw because it weakens users’ understanding of solar economics. To address this shortcoming, WattPlan should be configured to include a conservative estimate of SREC value over the system’s lifetime, or at a minimum include a chart of SREC sale options that reflect present SREC pricing.
DC SUN offers the following cost estimate for a typical 5.5 kW system priced at $3.50/watt, including the 30% Federal Tax Credit and the upfront sale of SRECs for 15 years. As you can see, factoring in SREC values and the Federal Tax Credit significantly reduces upfront costs.
WattPlan’s shortcomings paint a misleading picture of the current costs- and savings- of going solar in Pepco service territory. By forgoing critical financing considerations and creating unrealistic price default settings, the Pepco calculator tool produces flawed calculations. That said, it is worth distinguishing between flawed calculations and flawed purpose. DC SUN supports the purpose of the WattPlan solar calculator, insofar as it empowers solar actors to make informed decisions. However, if the stated goal of WattPlan is to “simplify the complexity of the solar purchase decision,” then it must first correct its flawed calculus. Until then, this calculator will only intensify the complexity- and inconsistency- surrounding the decision to go solar.